Subscriptions: How to manage, maximise value and minimise subscription costs
The subscription-based business model is here to stay. Developing a proactive strategy for managing your subscriptions is crucial to stop feeling like you’re on a never-ending spiralling staircase. From project management to client communication tools, subscriptions can significantly streamline operations and enhance productivity, but they can also become a substantial financial burden if not managed effectively. Especially when we forget to cancel trials we promised ourselves we would when signing up.
This comprehensive guide explores strategies for managing your subscriptions, maximising value and providing tips for reducing subscription costs.
STRATEGIES FOR MANAGING YOUR SUBSCRIPTIONS
Establish a subscription register
A subscription register is an invaluable tool for keeping track of all your business subscriptions. This document should include essential details such as the service’s name, cost, billing frequency, next renewal date, and any pertinent notes about the service’s use. Maintaining a comprehensive subscription register lets you quickly assess your subscription portfolio, identify unnecessary expenses, and streamline your budgeting process.
A subscription register is also beneficial in an unfortunate and frustrating event if/when you need to cancel your credit/debit card because of fraud and need to update your card details on all of your subscriptions. Good news is we’ve done the hardwork for you and you can download our Subscription Register template here.
Review quarterly
Set a quarterly schedule to review your subscriptions. Service packages often change, and providers may introduce new, more affordable plans. Check if you can downgrade your subscriptions without sacrificing essential features. Also, check if you’re utilising all of the features in your package—have they introduced new features you weren’t unaware of?
During your quarterly reviews, assess each subscription’s use and relevance to your business. Review the benefits associated with each service and consider whether they’re still necessary. As part of your review, also look at the subscription cost per quarter and compare the quarterly cost against your quarterly income.
Use a tool like Asana or another project management system to set reminders for these reviews. This analysis helps you identify no longer-needed subscriptions, downgrade options, or free alternatives to replace paid services.
Evaluate the return on investment (ROI)
To make informed decisions about which subscriptions to keep, evaluate the return on investment (ROI) for each one. Consider whether the subscription benefits your clients, enhances their experience, or improves your business processes. For example, the cost may be justified if a marketing tool helps you acquire new clients and increases revenue. However, if a subscription doesn’t directly contribute to your business’s success, it may be time to cancel it.
To help you determine the value of each subscription, we recommend asking yourself the following questions:
- Does this subscription benefit my clients?
- Does this subscription improve my client experience and make it easier for my clients to do business with me?
- What’s the outcome if I cancel this subscription? Break this down.
Update your Chart of Accounts
A great tip a Chartered Accountant gave us was to separate subscription costs in your Chart of accounts. Each ongoing subscription has a separate allocation code, such as Subscription – Canva. There were a few reasons for doing this:
- It gives a clear understanding of the annual cost for each subscription
- You can quickly and easily see subscription costs when looking at your Profit and Loss.
- Subscription costs can be correctly allocated to either Cost of Sales/Cost of Goods Sold or Operating Costs.
- It speeds up the bookkeeping process for allocating recurring monthly costs.
Accurately allocating subscription costs to the Cost of Sales or Operating Expenses aids accurate financial reporting and helps make informed financial decisions. We recommend speaking with your bookkeeper or accountant to discuss updating your Chart of accounts.
“What gets measured gets managed”
– Peter Drucker
Recoup the cost of the subscription
For the subscriptions attributed to the Cost of Sales/Cost of Goods Sold, add a portion of the subscription cost to the pricing of your product/service. Adding the cost, or a portion of the cost, of subscriptions into the price of your products or services allows you to recoup the expense without directly impacting your bottom line. This approach ensures that the value provided by the subscription—such as access to premium tools, specialised software, or exclusive resources—is seamlessly integrated into the offerings to customers, especially if you’ve identified in your ROI evaluation that the subscription does benefit your clients.
Pause subscriptions you’re not currently using
If you need clarification about the necessity or value of certain subscriptions, consider pausing them if that option is available. This option allows you to evaluate the impact on your business without committing to cancellation. If the absence of a service doesn’t affect your operations, it might be a sign that the subscription is not essential.
Regain control from feeling overwhelmed
Subscriptions can quickly become overwhelming, especially when they accumulate unnoticed. To help you regain control:
- Start with the most expensive subscriptions. Begin your cost-cutting efforts by reviewing the most expensive subscriptions. Assess whether they provide sufficient value to justify their cost.
- Consolidate or eliminate overlapping services. Look for redundancies in your subscriptions. If you’re paying for multiple tools that serve the same purpose, choose the one that best meets your needs and cancel the others.
- In extreme cases where subscription management has become unmanageable, consider cancelling your payment method. This approach forces a reset, allowing you to assess which services are necessary as renewal and non-payment emails land in your inbox.
Be proactive
Effective subscription management requires a proactive and strategic approach. Regularly reviewing and evaluating your subscriptions ensures that each service aligns with your business needs and provides tangible benefits. The goal is not merely to reduce costs but to optimise resources, ensuring that every subscription adds value to your business.
“Hard is the price we pay today for an easy tomorrow”
– Steven Bartlett
STRATEGIES FOR REDUCING SUBSCRIPTION COSTS
Avoid paying for unnecessary subscriptions
Before subscribing to any service, ensure you have a clearly defined process that the tool will support. Subscriptions should complement your existing process, not replace the need to develop one. Without a well-thought-out process, you can subscribe to multiple tools that offer overlapping functionalities, leading to unnecessary spending.
Pay annually
Another effective way to save on subscription costs is to opt for annual payments instead of monthly ones. Many services offer significant discounts for yearly subscriptions, sometimes as much as 20-30%. However, switching to yearly payments must be done strategically to avoid affecting your cash flow. While annual payments can be a cost-saving measure, avoiding switching all subscriptions to annual payments is crucial. Plan the switch ahead of time, and for significant subscription costs, switch during financially stable months to avoid cash flow issues. Staggering these payments throughout the year prevents lump-sum expenditure from falling in the same month.
Establish shared access accounts
Managing subscriptions can become costly for businesses with multiple team members, especially if you’re paying for multiple user licenses. One workaround is to set up a shared access account with a generic login, such as [email protected], that numerous team members can use. This approach maximises the use of a single subscription, which can be particularly useful for software that doesn’t require personalised user data.
Check that you’re using what you’re paying for
Many businesses subscribe to services they don’t fully utilise, either because the tool or service doesn’t fully match their needs, they’ve implemented a stop-gap approach, or they still need to explore their capabilities thoroughly.
Check that you’re using all the features you’re paying for. If not, will the free version meet your business needs, or research if a more affordable tool/program has become available. Service providers also often update packages. Check if the provider has updated your current package since you signed up, and consider downgrading your subscription if possible.
If you’re not using it, cancel it!
This tip is simple and self-explanatory. If you’re not using it, cancel it. Rip off the bandaid. You’ll be surprised at how liberating it can feel. Remember, you can always resubscribe at a later date. Check, though, that you didn’t sign up for a 12-month subscription, and you’re midway through your first year.
STILL FEELING OVERWHELMED?
If you’re still feeling overwhelmed about managing your subscriptions, please get in touch. We can assist you with getting back on track, researching the best providers for your business needs, and setting up your systems. Or, if you feel like you’re not sure if you’re paying for subscriptions that you might not need, read our blog on Getting back to basics: Breaking down online subscriptions for small business owners.
Remember, the key to successful subscription management is making informed decisions and prioritising value over convenience. The goal is not merely to reduce costs but to optimise resources, ensuring that every subscription contributes to your business’s success.